Topic: Flaw in Modern Economic Theory (Read 531 times)

1) The supply of money should expand, so that it keeps up with the supply of goods and services. As such a centralized authority is required to create more money so as to ensure that the supply of money remains proportional to the supply of goods and services, i.e, no inflation.

2) The price of land, oil, gold should not contribute to our metrics of inflation because they are goods with a fixed supply, although the number of people are growing. Their price naturally tends to rise and as such it is not indicative of true inflation.

These are clearly contradictory. If the first explanation is to be trusted, then the supply of things humans want is constantly expanding, and as such the supply of money needs to expand to accurately reflect a constant value of things people want. On the other hand, the second definition chooses to ignore the supply of things humans want that ISN'T expanding. In other words, they're selectively ignoring certain types of goods and services so as they can manipulate their data to support further inflation.

In order for their logic from (2) to work, then you'd need to assume a constant money supply, or at the very least a money supply proportional to the population.

In order for their logic from (1) to work, then you'd need to take into account all goods and services, i.e, keep the supply of money inversely proportional to the commonness of what people want (which is something almost entirely non-predictable, so even trying to do it is bound to lead to errors).